The Science of a Happy Startup

I’ve been a student and devotee of the Positive Psychology movement for as long as I can remember. I did my undergraduate at the University of Pennsylvania, where the movement took root, and took psychology classes there from some of the professors who have helped to fuel it. Since then, I’ve read just about every book and article written by positive psychology researchers.

I’m often stunned at how much has been scientifically proven about helping people be at their best (in gold-standard randomized, double-blind, placebo-controlled studies) that is still not known amongst the general population, and particularly the population of leaders and entrepreneurs who are best positioned to use the knowledge for good.

What I’ve learned from these studies and all the great science that’s been done over the last 10 or so years around happiness and well-being has largely driven my passion around helping startups build awesome cultures and supporting leaders to be their best, most authentic selves – I see the workplace as an incredible platform for increasing well-being in our society.

After reading Martin Seligman’s latest book Flourish, I was reminded that all this great knowledge from the Positive Psychology movement would directly benefit the greater entrepreneur and leadership community (for reference, Dr. Seligman is a psychology professor at Penn, former head of the American Psychological Association, and commonly referred to as the father of the Positive Psychology movement).

I’ll do my best here to summarize some of the key research findings and discoveries, and share my thoughts on how it can be applied to creating a Happy Startup.

P.E.R.M.A. – The Five Elements of Well-being

The Positive Psychology movement has evolved its collective thinking over the last 10 years, from a focus on life satisfaction (measured by the subjective question: “How satisfied are you with your life?”) to a more comprehensive focus on the construct of well-being. It turns out that when people answer the life satisfaction question, 70% of their answer is dependent on their mood at the time they answer the question. So, in its focus on this measure of life satisfaction, the movement has primarily been centered around mood (positive emotions) and to a lesser extent perceived life satisfaction, which primarily consists of a sense of meaning (connection to something bigger) and engagement (flow, being lost in what you’re doing). In Flourish, Seligman points out that the Positive Psychology movement, like many branches of psychology and philosophy, has suffered from “monism “– a view point that seeks to reduce all phenomena to one, single principle. Well-being, he argues, is made of five key elements, identified primarily by considering what human beings choose entirely uncoerced and irreducible, that which we desire for its own sake. Here are the five elements that comprise well-being:

P – Positive Emotions (gratitude, appreciation, joy)

E – Engagement (flow, the sense of being lost in an activity)

R – [Positive] Relationships (strong connections to others)

M – Meaning (impact, a sense of connection to something bigger than ourselves)

A – Accomplishment (achievement of specific goals)

Unlike life satisfaction, these five elements can be measured by a combination of objective (directly measured, externally validated) as well as subjective (self-reported) metrics. Interventions developed by scientists and psychologists (such as resiliency training, best possible self visualization, gratitude journaling and letter-writing, empathy training, optimism training, social skills training, etc.) have demonstrated the ability to meaningfully impact these metrics and increase well-being, and are being applied in the U.S. military (though an inspiring, far-reaching program called Comprehensive Soldier Fitness) and in education (though pilot programs at the Geelong Grammar school in Australia and at the Strath Haven High School, outside of Philadelphia ). The next phase of the Positive Psychology movement will involve converging on a validated, agreed-upon measure of well-being that can form the basis of public policy decisions, and hopefully supplant, or at least supplement, GDP as the primary goal of U.S. and most Western policy. Seligman puts forth a vision for the Positive Psychology movement: 51% of the population flourishing by 2051.

So… how can these findings be best applied to build a happy startup?

First, I think the shift amongst the Positive Psychology movement away from its singular focus on life satisfaction to multiple measurable objectives under the construct of well-being is an insightful idea. This has started to happen a bit in socially-responsible, double-bottom line enterprises, but it is far from the norm. Debates have raged as to whether the function of a business is solely to maximize shareholder value, and typical arguments about social responsibility, employee wellness and global impact are couched around whether or not they positively impact shareholder value. I think these arguments miss the mark by assuming that the phrase ‘shareholder value’ implies ‘shareholder dollars’. Last I checked, all shareholders are human beings (or at least are entities that are ultimately owned by human beings). Over the last 20 years, we’ve (finally) had some of the brightest scientists and psychologists on earth evolving our collective thinking on what is, in fact, valuable to a human being. It turns out, it is not just money.

Interestingly, researchers at Penn have found that the age old adage “money doesn’t buy happiness” turns out to be largely wrong. While it’s true that above a certain level, the impact of additional dollars of wealth diminishes, on a logarithmic scale the effect seems to persist linearly indefinitely. This basically means the more you have, the more you need to impact your well-being, but as long as you are capable of collecting enough additional wealth, you can continue to increase your well-being. So, this would seem to contradict my previous statement. However, in nearly all cases, generating additional income or wealth requires additional time and resources. It turns out there are MUCH easier, more productive ways to increase well-being using your limited time and resources than working to increase your wealth and income. So the old adage “money doesn’t buy happiness” might be more aptly stated as “money is a really expensive way to buy happiness.”

In a startup, you have limited time and resources so it’s important to consider the best possible ways to invest your scarce resources in increasing the well-being of your stakeholders. Let’s look at how each of the five elements of well-being can be applied to each of your three key stakeholders: Customers, Employees and Investors.

I. CUSTOMERS

P – Positive Emotions

In some ways, this is the most obvious one. If your products and services don’t make your customers happier, or better off in some important way, you likely won’t be in business for long. But that’s just the subsistence level. What if you made it your explicit goal to delight your customers – to give them a significant positive emotional experience? What if you spend as much time talking about how you want your customers to feel, as you do what the product needs to do?

In recent years, Apple has consistently delivered products that don’t just meet the functional needs of their customers, but actually create a powerful emotional experience. Other companies have been able to copy most of the product specifications and features as Apple’s iPhone and iPad, but without the internal focus on the customers’ emotions, they consistently fail to design products that are truly competitive.

E – Engagement

Engagement in this context refers to the sense of flow, of being lost in an activity. Think about not just the product or service that you provide, but the overall experience that your customer has at every step of interaction with your company. As Dan Pink points out in his book A Whole New Mind, the age of being able to successfully compete on competence and creating offerings that simply meet customer needs is behind us. To compete, you have to think about how to create an engaging, transcendent experience for your customers. What can you do to create an engaging experience that your customers can get lost in?

R – [Positive] Relationships

Imagine if everyone in your organization who interfaces with customers viewed it as their job to create meaningful positive relationships; relationships that in some small way contribute to the lives of the human beings that purchase your company’s products or services. Too often, we lump customers into a nameless, faceless bucket of those pesky people we need to buy what we sell, and whose complaints we need to find a scalable way to address. Tony Hsieh (Zappos’s CEO) loves to tell the story of a drunken call to Zappos’s HQ in which the caller was trying to find a place to order some pizza at 2am because room service in their hotel was closed. Instead of laughing (or screaming) the caller off the phone, the Zappos rep did some Internet sleuthing and found the names of a pizza place near the caller that was open. While in no way contributing immediately to Zappos’s bottom line, that rep enhanced the life of the caller.

M – Meaning

In Simon Sinek’s book and Ted Talk, he discusses the importance of ‘Start(ing) with Why.” “People don’t buy what you make,” he says, “they buy Why you make it.” In a (Western) society where the majority of basic survival needs are met, people are increasingly searching for more meaning in their lives. Companies that stand for something and seek to have an impact give customers a chance to have more of a sense of meaning in their lives. Consider TOMS Shoes. For every pair of shoes you buy from TOMS, they donate a pair to a child in need. What a great way to ‘do good, while doing well’ and more importantly, give customers a chance to do the same!

Consider what you stand for as a leader, and as a company? How can you make an impact, and give your consumers a chance to have a deeper sense of meaning by buying what you make? Do you communicate an inspiring vision to a your customers? What’s your ‘Why’?

A – Accomplishment

Interestingly, the recent trend in ‘gamification’ I think is largely a broadening understanding of customers’ basic desire to achieve. Providing customers ways to achieve milestones can be a great way to keep them engaged and enhance their well-being. It’s no coincidence that some of the most successful marketing tools across more ‘traditional’ industries ranging from retail stores to airlines and hotels are loyalty programs that give customers ways to earn points and achieve different levels and rewards. If the idea of enabling customers to achieve can work for all these different companies and industries, it’s worth at least considering: how can provide opportunities for your customers to achieve?

II. EMPLOYEES

P – Positive Emotions

Research has shown that most employees (i) value praise and recognition from their boss and co-workers at least as much as a significant financial bonus and (ii) don’t get it. Ironically, expressing gratitude and appreciation does as much (or more) good for the one doing the expressing as the recipient. One of the most consistent and effective interventions found to boost positive emotions involves writing a letter of gratitude to someone who made a positive impact on you and reading it to them. So, expressing gratitude and praise can boost positive emotion in both the giver and the receiver of praise – and yet, it is rarely done. What if you started giving praise and expressing gratitude to just one other team member each day? What difference would that make in your day, and in theirs?

Another study (featured in Flourish) in which researchers transcribed hours of discussions during company meetings across a variety of companies showed that companies who had a ratio of 3 positive statements for every 1 negative statement were thriving economically, while those with a ratio of lower than 3:1 were struggling. This ratio (called the Losada ratio after the researcher who discovered it) has been shown for the well-being of individuals and couples as well (though couples need a 5:1 ratio). How’s your ratio? What can you do to increase the amount of positivity and reduce the positivity in your company? Your bottom line, and your well-being, depends on it.

E – Engagement

In the book Flow by Mihaly Csikszentmihalyi, it’s explained that flow is achieved when the level of challenge we’re facing is equal to our talents and abilities. When the level of challenge is below this, we get bored. When the challenge is greater than our talents, we become anxious and overwhelmed. To what extent does your company focus on ensuring that all team members are in flow (and that they stay in flow as their talents and abilities expand)?

R – [Positive] Relationships

In the book Tribal Leadership, authors Dave Logan and John King, discuss the notion of triads – three way relationships based on shared values between each of the pairs in the triad. The triad is a strong relationship structure because the job of each member of the triad is to strengthen the relationship of the other two members. The classic example of this is parents and child, in which the child will intervene when mom and dad are fighting, mom will step in when dad and child aren’t getting along, etc. Interestingly, having done some work with Dave Logan and his team at his consultancy CultureSync, Zappos measures the number of triadic relationships within the company, as well as across divisions and hierarchical levels. When each team member logs into their workstation, they see a photo of another team member and are asked: “How well do you know this person?” Once they answer, they see the person’s name and profile. While this alone is helpful to build familiarity, what they are actually doing is a systematic measurement of triads. Managers are incentivized to increase the number of triadic relationships, and Zappos is notorious for the number of events and extracurricular activities they do with their team. In Tony’s speeches, he cites a 20% increase in productivity when you have people who trust each other and feel connected, so he believes it’s justified to have employees spend as much as 1 day a week simply getting to know each other better (in fact, they achieve a deep level of connection in much less time). What are you doing to invest in your team members having positive relationships with one another?

Importantly, employee-to-employee relationships aren’t the only, or the most important, relationships in your team members’ lives. Consider what you can do to enhance your team members relationships with their own families and friends – whether that’s indirectly by building a work schedule and pace that takes into account the realities of peoples’ lives, or directly by including families (and potentially even friends) in company events.

M – Meaning

Employees who understand how what they do everyday contributes to the overall (inspiring!) vision of the company will work harder, stay longer and be happier. So, (i) how inspiring is your vision? And (ii) what are you doing to make sure that employees understand how what they do contributes to it?

A – Accomplishment

Achievement is important to everyone’s well-being, and yet in many companies the only people in the company with clear goals and metrics for success are the salespeople. Think about how you can create clear, measurable results for each and every member of your team so that they can enjoy the fulfillment of knowing when they’ve achieved their goals.

Kleiner Perkins encourages their portfolio companies to use a system called O.K.R.’s, in which the company creates its overall Objectives and up to 3 Key Results for each objective. Then, the leadership team’s Objectives are built from the company’s Key Results, and the next level of the organization builds its Objectives from their Key Results, etc. This creates a flow down of clear, measurable goals for everyone in the company (and helps ensure that everyone understands how what they do contributes to the company’s overall vision and goals).

III. INVESTORS

P – Positive Emotions

One thing that I think startup founders and CEOs too often forget is that investors are people too. There’s a lore amongst the startup community around investors (especially venture investors)- investors are often looked at as judge and jury, a force to be reckoned with and sometimes even the enemy. Consider the impact of taking a different approach and looking at investors as simply fellow human beings who have chosen a career path around allocating capital instead of operating companies. What would your life be like if you spent time and energy helping to make your investors feel good, checking in with them periodically to see how they’re doing, getting to know them on a personal level and helping them appreciate the impact of their decision to invest in you and the ways in which its benefiting you, your team and your customers.

I’ve seen many startup founders/CEOs seek to build ‘real’ relationships with their investors and board meetings too late in the game, once the situation has gotten contentious or their job is in question. Consider what those ‘difficult conversations’ would be like if you’ve been investing in the relationship and helping your investors feel good from day 1.

E- Engagement

Try looking at each of your investors as members of your team. If your job is to keep the team fully engaged in their work, what would this mean for your investors? Some of the most successful startups look at their investors exactly this way, and make sure to fully leverage their incredible networks, experience and insights by engaging them in the process of building the company. Instead of being afraid to impose on your investors, consider that giving them a chance to be fully engaged with you in building the company is an opportunity to increase their well-being. Try to understand each of their strengths and find ways to put them to work that most leverage their unique strengths.

R – [Positive] Relationships

Again, think of your investors simply as fellow human beings and find ways to build strong, positive relationships with them. Seek out opportunities to help them establish relationships with other people on your team and in your network. One of the most effective ways to strengthen your own relationship is to make a valuable introduction. Think about who on your team would benefit from getting to know certain investors, and vice versa.

One of the best investments you can make in your relationship with investors is working to build trust from day one. According to Stephen M.R. Covey (in his book Speed of Trust), the keys to building trust in relationships are:

telling it like it is

actually caring about them and their opinions

immediately make things right when you make a mistake

acknowledging their contributions

establishing a track record of results

showing your commitment to continuous learning and growth

confronting tough issues head on

clarifying expectations

listening to what they have to say before speaking

honoring your commitments, and

extending trust to them

M – Meaning

A lot of people think investors are just in it for the money. Most great investors view their role as empowering entrepreneurs to change the world in important ways. When raising money, make sure to clearly convey the higher purpose of your vision – why are you really doing what you’re doing? How do you want the world to be different because of your company? (see my post on Creating an Inspiring Vision). You have a chance to give investors a meaningful experience of seeing how their work is making a positive difference in the world.

Once you’ve raised money, seek out opportunities to share stories with your investors about the ways your products or services are impacting people’s lives. Share those touching emails you get from customers thanking you, and include them in celebrating the ways in which your team members are growing through their involvement with the company.

A – Accomplishment

Make sure to acknowledge your investors’ role in your company’s success. Invite them to celebrate wins with you, and keep them informed about the company’s achievements. The more your investors view your company’s success as their own, the more engaged they will be and the better your relationships will be.

View your investors as members of your team and take responsibility for assigning them tasks and responsibilities that match their unique talents and strengths. This will give them a chance to enjoy the satisfaction of their own achievements, and of helping the company in a meaningful way.

And most importantly, think about what you can to increase your own Positive Emotions, get more Engaged in what you’re doing, enhance your Relationships, make your work Meaningful, and Accomplish goals that matter to you. Be Well!

This is such a great & timely post. This weekend has been one of introspection and deep thoughts (had dinner w an employee of my competition, a billion dollar enterprise who will seek to snap me like a twig, my friend confessed). Reconciling my passion to help people with the realities of building a sustainable business is exhausting. My takeaway from the post: be true, do good, keep the faith.

A powerful reminder of the importance of thoughtfully considering the stakeholder relationship(s). It’s in this that businesses can align purpose and profit, sustain, grow, positively impact communities/society. Perhaps even have something to say via social innovation about the way we blow past the current economic malaise.